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Trade and income at different stages of economic development


  • Dong-Hyeon Kim
  • Shu-Chin Lin


Recent research has found a strong positive effect of international trade on real income. We propose that this relationship may vary with the level of economic development. Using the instrument variable threshold regressions approach proposed by Caner and Hansen (2004), we find evidence that trade openness contributes to uneven development. Greater trade openness tends to have beneficial effects on real income for more industrialized countries. For less developed countries, however, trade openness appears to influence real income in a significantly negative way. The findings imply that greater international trade and integration may foster inequality of nations and hence contribute to more diverging economies.

Suggested Citation

  • Dong-Hyeon Kim & Shu-Chin Lin, 2012. "Trade and income at different stages of economic development," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 409-421, February.
  • Handle: RePEc:taf:applec:44:y:2012:i:4:p:409-421
    DOI: 10.1080/00036846.2010.508726

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    References listed on IDEAS

    1. Matthew J. Slaughter, 1998. "International Trade and Per Capita Income Convergence: A Difference-in-Differences Analysis," NBER Working Papers 6557, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jörg Peters, 2015. "Diskussionspapier: Von Staaten, Märkten und Subventionen – Paradigmenwechsel in der Armutsbekämpfung?," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 13, 04.
    2. Chari, Murali D.R. & Banalieva, Elitsa R., 2015. "How do pro-market reforms impact firm profitability? The case of India under reform," Journal of World Business, Elsevier, vol. 50(2), pages 357-367.
    3. Peters, Jörg, 2014. "Von Staaten, Märkten und Subventionen: Paradigmenwechsel in der Armutsbekämpfung?," RWI Materialien 85, RWI - Leibniz-Institut für Wirtschaftsforschung.
    4. repec:zbw:rwimat:085 is not listed on IDEAS

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